Jeroen Hölsher, Global Head of Payment Services at Capgemini, continues his conversation with Payment Expert analysing the key findings of the company’s recent World Payments Report 2025.
After discussing regional payment innovation and key digital payment trends in part one, part two see’s Hölsher outlining why instant payments will surge in usage over the next decade, what ‘groundbreaking’ regulations will enable this, and details why Account-to-Account (A2A) payments will likely disrupt the debit and credit market dominance.
Payment Expert: What will the impact of the EU Instant Payments Regulation in 2025 mean for the adoption of Instant Payments across the region?
Jeroen Hölsher: The European Union launched the Instant Payment Regulation (IPR) in Q2 2024 to drive European instant payment availability, standardisation and interoperability, fair pricing, and enhanced security features.
Phase I requires all eurozone payment service providers (PSPs) to be able to receive instant payments by 9 January 2025. By 9 October 2025, Phase II will require all eurozone PSPs to offer the facility to send instant payments. Non-eurozone markets have a later compliance timeline, with 9 January 2027 for receiving, and 9 July 2027 for sending instant payments.
This regulation will be a gamechanger for shaping the instant payment landscape in Europe.
Our research tells us that most banks are exploring use cases on both retail and corporate payments to boost instant payment volumes. While the pan-European instant payment scheme, SEPA Instant Credit Transfer (SCT Instant), was launched in 2017, the uptake was limited. The regulation will mandate banks to offer instant payments to clients at price point-at-par with regular SEPA payments.
However, a key barrier for instant payment is the low transaction limit imposed by countries.
In the near future, we believe regulators must re-consider the transaction limit of instant payments and increase them significantly to boost more high-value corporate payment use cases. For example, in the Netherlands, there is no cap on transaction value through instant payments. Unsurprisingly, now nearly all credit transfers in the country are instant.
Has the acceleration of account-to-account payments placed pressure on card networks such as Visa and Mastercard to lower interchange fees? Could A2A payments become the preferred payment method of choice moving forward?
Pressure to lower card interchange fees has been building up for some time. The Durbin Amendment to the Dodd–Frank Act, passed in 2010 in the US, regulated debit card fees.
Similarly, in Europe, debit and credit card interchange fees were capped in 2015. As account-to-account (A2A) payments gain traction globally, retailers stand to benefit from low-to-no cap on payment transactions.
For A2A payments to truly become the preferred choice for payments, the security and reward challenges must be resolved to effectively compete with traditional card franchises.
Traditionally, issuing banks have long relied on loyalty programs to incentivize card usage, offering customers travel points, cash back, and other rewards that keep them engaged. Through this model, banks generate interchange fees and maintain a profitable business model.
A robust and structured dispute resolution system for cards also enhances their popularity. Unlike other payment mechanisms, cardholders facing purchase issues can ask their bank to initiate an investigation. Once the bank validates the claim, it retrieves the disputed funds through a chargeback process with the merchant’s bank.
This chargeback process is a cornerstone of the global card network’s dispute management framework, providing security and making cards a more reassuring choice for customers.
Based on our research, we also believe that A2A payments may strongly complement, if not supplant, card dominance in the short-term. Payment executives envision that wider adoption could make instant A2A payments rival debit cards.
This shift may prompt established players like Visa and Mastercard to oversee instant A2A systems. For instance, Visa’s A2A service in the UK, launching in early 2025, will be a rules-based system for bill payments and subscription management with a formal dispute resolution process.
Meanwhile, Mastercard and Visa are building interoperability between various payment options through their multi-rail and Network of Networks strategies.
What more can be done to increase the adoption of Open Finance and how important can it be in reducing fraud?
Open Finance expands the horizon of Open Banking beyond payments and account data, encompassing a 360-degree financial footprint of consumers.
When we asked payment executives about their progress on Open Finance, it left much to be desired. Only 39% said Open Finance is under consideration with relevant stakeholders, while 23% said they need more regulatory clarity before committing resources to open finance.
In Europe, the Financial Data Access (FiDA) regulation will be implemented in stages from Q3 2024 to 2027, coinciding with the rollout of PSD3 changes that are set to hit the market at the same time. Banks should focus on developing robust, secure, and scalable API infrastructures, along with reliable data management and governance frameworks.
Open Finance will play a crucial role in reducing fraud while enhancing customer experience, optimising banking processes. It enables instant account verification, device and identity checks, and can work alongside other fraud solutions to analyse customer interactions, tracking and flagging anomalies.
Additionally, Open Finance will also improve account aggregation services. Traditional screen scraping requires consumers to share usernames and passwords, creating security vulnerabilities.
With Open Finance APIs, consumers can securely connect and share their data on their own terms, allowing only authorised third-party providers access. Consent management empowers users to control their data, ensuring it isn’t shared without their permission. Secure connections to financial institutions also activate existing anti-fraud systems.
Lastly Jeroen, and thank you for your time, the report predicted that instant payments will account for 22% of all non-cash transaction volumes by 2028. What facets went into the assertion and what will need to be done in order for this to come to fruition?
Absolutely, I appreciate the chance to discuss this! Our prediction on instant payments accounting for 22% of all non-cash transaction volumes by 2028 incorporates several key factors:
- Technological Advancements: The widespread adoption of smartphones, improved internet connectivity, and advancements in payment technologies (wallets, POS innovations, etc.) have paved the way for instant payments.
- Consumer Preferences: Today’s consumer increasingly values speed, convenience, and real-time access to their funds, driving the demand for instant payments.
- Regulatory Support: Governments and regulatory bodies have played a crucial role in promoting instant payment systems through policies and incentives.
- Economic Factors: Factors such as increased e-commerce activity can also contribute to the growth of instant payments.
- Regional Variations: The growth of instant payments may vary across different regions due to factors such as economic development, regulatory environments, competition from cards, and consumer preferences locally.
To make this forecast a reality, or even exceed it, we need to focus on a few key areas:
- Interoperability: Ensuring seamless interoperability between different payment systems and networks is essential for widespread adoption.
- Security and Trust: Europe has a very fragmented verification of payee (VoP) landscape. VoP is important for secure instant payment transactions. Harmonisation of the VoP process becomes a critical success factor for instant payments.
- Infrastructure Development: Investing in the necessary infrastructure, such as real-time payment systems, cloud computing, and data centres is crucial.
- Regulatory support: As I mentioned earlier, re-considering the instant payment transaction limit, and potentially removing the cap.
